Why Many Businesses Fail

Being an entrepreneur or business owner is not an easy road.  It’s a life full with stress, uncertainty and complications.  We all start our businesses in the hopes of someday becoming successful.  Success, of course, being a relative term which might mean something different to everybody.  Notwithstanding semantics and incidentals, most of us hope to make more money as a business owner than we could as an employee.

It’s been said that he who does not learn from history is doomed to repeat it.  The best way to learn about anything it to learn from other people’s mistakes.  If you were to analyze the reasons why businesses have failed in the past, you would come across several commonalities.  Being aware of these elements and monitoring them within your own company can greatly improve your operation or at the very least, let you know if you’re fighting a losing battle.

Inadequate Employees and/or Leadership

The people who work within any organization play an important role as to whether or not it will be successful.  Everyone must pull their own weight and if there is a kink in the chain, it could negatively affect the whole system.  Clients want good service and if they don’t get it, they’ll move on to the next service provider. 

If you have more employees than you need, you will waste money.  If you don’t have enough employees, it will put a strain on the operation and things won’t get done properly.  If your employees are overworked, they will be resentful. If they are under-worked, they will be bored.  If management is inept, this will lead to a breakdown in the entire system.  Your staff is a big part of your business and if they are not working efficiently, business will suffer.

Inadequate Products and/or Services

If your products or services are undesirable, your clients won’t feel they are worthy of their price.  This seems simple but it could get more complicated.  You may think that your products/services are worth something but no one else does.  Another possibility is that your products/services might be desirable but there is an overabundance in your geographic region.  Supply and demand is the cornerstone of any economy.  Maybe your products/services are great but their price is higher than the industry standard or what your clients would consider to be reasonable and customary.

If your products/services aren’t selling, you have to analyze why and determine whether or not there is a solution.  There may not be.  If there isn’t, the only way to salvage your business is to change or add to your current product/service offerings.  Maybe your products/services will be more desirable if they were coupled with other products/services.

Inadequate Systems and/or Policies

If your employees are working efficiently, your managers are leading properly and your company is offering quality products and/or services, it’s possible that there is a gaping hole in the way in which you are conducting business.  In this case, an internal control audit must be conducted and your entire operation must be analyzed from the minute you open to the minute you close.  Write down your company’s entire process on a piece of paper, from the moment you receive your inventory to the moment your clients pay you.

Inefficiencies in the way your company functions could lead to wasted money and unhappy clients.  Either way, your company is losing money rather than progressing.  Go over your procedures with a fine-toothed comb and look for any operational deficiencies that could be detrimental to your bottom line.  They could be right below the surface but if you don’t specifically look for them, they could go unnoticed. These operational deficiencies will eat at your company like a cancer.  A small crack in your foundation could lead to the collapse of your entire infrastructure.  Your business model must be flawless in order for your company to be successful.

There are many reasons why a business could fail but if you look closer at the reasons why you think yours is under performing, it most likely will be derived from one of the situations mentioned above.  There are some measures that business owners can take to mitigate their chances of failure.

Know Your Industry

Before starting a business in a particular industry, it’s important to do your due diligence in terms of understanding the dynamics and inner workings of that industry.  These are things that you may not necessarily see in a book or the internet.  If you haven’t been working in your industry for a substantial amount of time, you have to speak to people who have.  You may think the industry you’re in is a good one but once you dig a little deeper, you may find that there are serious complications that you could be faced with that may not have been initially apparent. Also remember that industries change so what may have worked before may not work now.

Know Your Clientele

Some people run their business based on what they want, not necessarily what their customers want.  It’s natural for all of us to assume that others think the same way we do, but they may not.  The best way to know what your clients want is to simply ask them.  If possible, have conversations with them and get to know their needs better.  Conduct surveys to see if you can harness customer input.  Also question your staff if they have more interaction with your clients than you do.  The data that you collect is invaluable.

Know Your Numbers

It’s easy to get so caught up in the day-to-day operation of your business that you lose track of the flow of money coming in and going out.  Some business owners neglect this function because they’re not particularly good at numbers.  Nevertheless, as a business owner, you must be good at numbers.  You may think that your company is profitable but it really isn’t.  You could be overspending and not even realize it.  Your company can be growing too quickly, not charging enough for products/services, spending too much on expenses, etc.  Your employees could even be stealing from you.  There are a million reasons why keeping track of finances is important to the stability of any company.

For more information about why your company may not be as successful as you hoped it would and what you can do to improve it, please call Ashlar Consulting Corporation at 305-849-9399 or visit www.AshlarConsultingCorp.com.